Wall Street Week Ahead: Focus on Facebook, Apple and the Fed

Sun Oct 27, 2013 11:31am EDT
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By Julia Edwards

NEW YORK (Reuters) - The Federal Reserve meeting next week is not on the minds of as many people as when it met in September, but its decision to do nothing last month is providing the fuel for more share gains in Apple and Facebook, which report results next week.

Facebook is only slightly off an all-time high, and Apple has recovered somewhat from losses earlier in the year after investors have poured money back into stocks, bringing the S&P to successive records that some say may not be supported by corporate results.

The numbers from Facebook (FB.O: Quote) and Apple (AAPL.O: Quote) are among those that will be closely watched - and investors say at their current levels, the margin for error is slim.

Nearly half of the S&P 500 companies have reported their third-quarter results so far, and 69 percent have beaten Thomson Reuters I/B/E/S estimates. The technology sector has led the way, beating expectations 84 percent of the time. The most recent companies to do so were Amazon.com (AMZN.O: Quote) and Microsoft (MSFT.O: Quote), whose results led the S&P to close at an all-time high of 1,759.79 on Friday.

Companies already stretched to high price-to-earnings multiples, like Facebook, will have to outpace expectations to keep investors buying.

"There is not a lot of room for error, especially with these names with a lot of momentum behind them. You have to beat the numbers pretty handily," said Daniel Morgan, vice president and senior portfolio manager at Synovus Trust Company in Atlanta, who focuses on tech stocks.

That's where the Fed comes in. Some of the riskier names and high-dividend payers had pulled back in the late summer, anticipating the Fed would begin reducing monthly bond purchases beginning at its September meeting.

But that didn't happen - and since then, stocks have been unimpeded, save for the 16-day government shutdown that didn't scare too many people.   Continued...

Traders work on the floor of the New York Stock Exchange, October 25, 2013. REUTERS/Brendan McDermid